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This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results. Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
In a world of negative interest rates where is the price incentive for the banking system to allocate capital to areas of the economy that carry default risk? Who is providing working capital loans to emerging businesses in negative rate countries? As this experiment evolves I become more deeply convinced that the model is deeply flawed and agree that it is damaging potential growth.
Can we rename Permanent Open Market Operations to Forever Open Market Operations…?
Calling Negative interest rates a Social policy is wonderful. It is a peculiar form that serves those who can borrow large amounts and invest it in whatever pays even the smallest return. On the other hand it ruins savers who’ve stupidly been working and putting money aside.
So social as in socialite, maybe.
We are already seeing the beautiful results of that policy in demonstrations across the world.
As for pension funds needing the capital gain provided by even lower rates to make up for the absence of return, it is investment as pass the parcel. So who is the last buyer? Will central banks buy bonds above par and hold them to term to lock in a loss? That should really produce interesting results.
Great article, well reasoned, makes way to much sense. It’s all going to end very badly one day. It’s just, the current narrative says that day is a gazillion years from now… So just keep buying.